Text Size

DRIVING THE DAY: ONLINE SALES TAX HEARING. House Judiciary Chairman Bob Goodlatte will kick off the day with a hearing discussing how Congress could change the way states collect sales tax from online, out-of-state retailers. The Virginia Republican isn’t a fan of the legislation passed by the Senate last year and has released his own priorities for online sales tax collection that call for a potential removal of the $1 million small-seller exemption and a simpler process for small businesses to track the sales taxes owed.

A number of both proponents and opponents of the idea of extending sales tax collection nationally to online retailers will testify. Here’s a quick look at what three of the witnesses plans to say today.

Christopher Cox, with NetChoice: “The current “physical presence” standard protects all businesses, large and small, from the unreasonable compliance burdens they would face if forced to collect for thousands of state and local tax jurisdictions within the United States.”

Joseph R. Crosby, a principal with MultiState Associates Incorporated: “There are two main stumbling blocks to the remaining states adopting the Streamlined Agreement. The first, and most obvious, is that there is no guarantee that adopting the Streamlined Agreement will lead to collection of legally due sale taxes by remote sellers.”

Stephen P. Kranz, a partner with McDermott Will & Emery, LLP: “A radical departure from the existing sales tax regimes i s not needed. Businesses, commerce, consumers and, perhaps most important, the United States economic sy stem would be greatl y enhanced if Congress were to fix the problem by exercising its Commerce Clause authority and provide a uniform structure for the state enforcement of sales tax collection on remote sales, a structure that will provide the simplifications, technology, and protections needed to eliminate any undue burden.”

CAMP DID WHAT HE COULD WITH REFORM: ESTABLISH A LEGACY. Our Kelsey Snell reports, “The famously measured, party soldier-of-a-chairman’s tax code overhaul plan unleashed a flurry of hand-wringing from lawmakers and lobbyists, with no path to finish the fight he had started. Maybe that wasn’t the point.

Ripping up the tax code is difficult under the best of circumstances, a fact [House Ways and and Means Chairman Dave] Camp knew before he set his goal in a Congress that is, at times, barely functional. He could have given up or cozied up to House Democrats to help move his legislation. Instead he released the draft he promised, securing a divided legacy as both a policy renegade and the man who fell short on tax reform…According to interviews with more than a dozen current and former committee aides, members of Congress and tax policy experts, Camp is settling for becoming the man who set a standard for tax reform to come, and it may have been the only option.” http://politico.pro/1iwaFdu

ISSA TAKES AIM AT LERNER IN NEW REPORT. Wall Street Journal’s John McKinnon writes, “A new report by House Republicans concludes that former Internal Revenue Service official Lois Lerner engaged in wide-ranging, politically motivated efforts to hamper conservatives' use of tax-exempt organizations. The report by Republicans on the House Oversight and Government Reform Committee said Ms. Lerner ‘believed the political participation of tax-exempt organizations harmed Democratic candidates, she believed something needed to be done, and she directed action from her unit at the IRS.’ It concluded Ms. Lerner's actions went beyond targeting tea-party groups for lengthy examination. It said she also directed scrutiny of larger organizations already acting as tax-exempt organizations, such as ‘those supported by the 'Koch Brothers,'’ who are wealthy conservative donors.” http://on.wsj.com/1iaFo1h

HAPPY WEDNESDAY! Morning Tax has whiplash from how quickly the weather is changing. Here’s hoping this week is the last extreme. If you want to talk taxes, send gossip, scoops or actual tax advice to lfrench@politico.com or @LaurenNFrench on Twitter. As always, please follow @POLITICOPro and @Morning_Tax.

ON THE MOVE: The Credit Union National Association has promoted Patrick Keefe to senior vice president of communications. He was previously the vice president in the trade group’s communication shop.

501(C)4 DEBATE COULD IMPACT UKRAINE BILL. From Bloomberg’s Kathleen Hunter and Derek Wallbank, “Republicans in Congress want to add language to a U.S. aid plan for Ukraine that would block a proposed IRS rule curbing political activity by tax-exempt groups, Senator Bob Corker said. Corker, the top Republican on the Foreign Relations Committee, said the proposed Internal Revenue Service measure was one of the unresolved issues facing lawmakers working to complete a Ukraine aid package in time for the panel to consider it [today.]” http://bloom.bg/1lwyzHC

CREDIT UNIONS ON THE WATCH AFTER BANK LETTER. After two of the largest banking trade groups wrote to House Ways and Means Chairman Dave Camp this week demanding that the would-be tax reformer reevaluate the credit union tax exemption granted, credit unions are responding inkind. A letter to Camp from the National Association of Federal Credit Unions touts the economic benefits they argue their members provide to the country — a figure they place at $17 billion annually. This is hardly the first battle royal between banks and credits unions. The two groups have been slamming each other for years — despite a short-lived détente over swipe fees — about which group is most unfairly treated by the tax code.

“While the banking trades claim credit unions threaten the business done by other financial institutions, this is simply untrue…The banking trades claim the credit unions have unfair advantages and should be taxed. If credit unions have such an extraordinary advantage, why aren’t banks lining up to convert to credit unions…As you know, during the financial crisis credit unions continued to lend to consumers and small businesses that were left behind by our nation’s mega-banks,” the letter says. http://bit.ly/1fSv1zV

KASICH MAKES GOOD ON OIL, GAS TAX INCREASE. Ohio Governor John Kasich proposed increasing taxes for oil and gas producers operating in the state’s shale fields — a budget inclusion that was expected from the Republican but has still met resistance from members of his own party. In the proposal, Kasich called for the state gas severance tax to be 2.75 percent of producers’ gross receipts with an $8 million exemption for gross receipts during a well’s first three years. The current rate is 2.5 percent.

“Ohio’s 40-year-old severance tax has not been revised to reflect the advent of the state’s new shale oil and gas boom, which means that profits from horizontal drilling and the benefits of low tax rates go to the out-of-state oil companies,” a fact sheet on the plan explained.

But even though this paired down version of the tax has won him support among some Republicans, the American Petroleum Institute called the proposal “significant roadblock” to develop Ohio’s Utica shale resources.

NORQUIST KNOCKS CHRISTIE ON TAXES. Anti-tax crusader Grover Norquist on Tuesday wrote to state lawmakers blasting two tax proposals in the most recent budget from New Jersey Gov. Chris Christie a 2016 president hopeful. The budget would place $63 million worth for levies on e-cigarettes and to allow the state to collect tax on out of state Internet sales.

By raising $35 million on vapor products like e-cigs, the government will be encouraging smuggling and make the state’s prices uncompetitive, the letter said. Norquist compares the proposed $28 million Internet sales tax to the Senate-passed Marketplace Fairness Act, which he said violates the constitution “making small businesses the tax collector for the state.”

Christie spokesman Kevin Roberts said the sales tax measure is necessary to level the playing field for in and out-of-state businesses. “Particularly with respect to the online sales tax, it’s important to note that New Jersey businesses and Amazon already have to collect these taxes,” Roberts said.

OBAMACARE ENROLLMENT FALLS FROM A MONTH AGO, BUT SOME PREDICT TAX SEASON WILL HELP. Our Kyle Cheney has the story, “About 940,000 people selected Obamacare insurance plans in February, bringing to 4.2 million the total number of people opting for health coverage in the law’s insurance exchanges since the enrollment opened in October. That’s a 17 percent plunge from a month earlier, when about 1.1 million people selected health plans, but administration officials hope they’ll turn that around as they intensify outreach efforts as the March 31 enrollment deadline nears.” http://politi.co/1oKszuJ

What does this have to do with tax season? Tax refunds. Jackson Hewitt health care vice president Brian Haile predicts the Administration will make its goal of signing up 6 million enrollees by March 31. “Simply stated, consumers now have the liquidity to purchase insurance,” Brian emails, with a chart that shows how Marketplace enrollment and tax refunds are closely tied. “As the IRS continues to distribute some $325 billion in tax refunds, enrollment is likely to spike.” http://bit.ly/PqvAqb